The Institute of Directors business group has called for the minimum wage to be linked to earnings from now on.

The minimum wage rose 4% to £5.05 an hour this week and there is a further 6% rise planned next autumn.

But the IoD has called for the Low Pay Commission to reject next year’s rise to £5.35 an hour when it comes up for review in February.

Graeme Leach, chief economist at the IoD, said: “Over the past year, more businesses have voiced serious concerns at the damage to competitiveness from continued over indexation of the minimum wage.

“There is now a real risk that the national minimum wage could lead to significant job losses as the economy weakens.”